Treasurys rise; Greece, election share spotlight

Auction demand likely to depend on presidential election’s outcome

By

DeborahLevine

SAN FRANCISCO (MarketWatch) — Treasury prices edged higher on Monday, pushing yields lower, as bond investors split their attention between anxiety ahead of the U.S. election and fresh worries about whether Greece will get its next tranche of bailout money.

“Safe-haven global fixed income has a bid ahead of several key votes from Greece this week that have European risk assets nervous, and ahead of the U.S. presidential elections tomorrow,” said Bill O’Donnell, head of Treasury strategy at RBS Securities. Read wsj.com: Greece’s financing in focus.

Treasury prices stayed higher after the Institute for Supply Management’s index on the services sector of the U.S. economy fell to a reading of 54.1 in October from 55.5 in the prior month, roughly in line with analysts estimates.

Gains may be limited ahead of this week’s trio of Treasury Department auctions, starting with 3-year notes
US:3_YEAR
on Tuesday. That will be followed by a 10-year sale on Wednesday, when investors hope to know who will be president for the next four years — a big determinant in the economic and fiscal outlook. On Thursday, the U.S. will sell 30-year bonds.

Americans will go to the polls on Tuesday to decide whether Barack Obama or Mitt Romney will be U.S. president for the next four years.

“An Obama victory is likely to bring in demand,” said George Goncalves, a bond strategist at Nomura Securities.

That’s because traders will probably position themselves for a shrinking gap between long- and short-term yields, flattening the yield curve which charts the spread between the two, he said.

A Romney win will be more bearish for bonds, so the longer-end auctions “would likely illicit weaker demand as rates rise,” he said.

Last week, long-term Treasury prices rose, as a report showing the U.S. economy added more jobs in October than had been forecast fed into expectations that President Obama would win a second term. Read: Treasurys steady as payrolls top forecasts.

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